Is Square the canary in the coalmine for over-hyped tech startups? That's the question investors are asking after the hip poster child for the fintech revolution priced its IPO at $9 per share, giving the company a price tag of $2.66 billion, some way south of the $6 billion valuation at its last private fund raising round.
Set to make its public debut on Thursday, Square's IPO is seen as a litmus test for the entire tech startup ecosystem, and that $9 per share pricing has just set alarm bells ringing across the industry.
In its latest filings Square posted a Q3 loss of $53 million on revenues of $322 million, its eighth successive loss-making quarter. Starting off as a simple mobile point-of-sale reader, Square's attempts to become a hip consumer facing brand in the mold of Apple has so far failed to find the magic formula, underscored by a calamitous deal with Starbucks that cost the company $71 million.
Earlier this month, Square had set its initial price range at $11-$13 per share, giving the company a valuation of some $4.2 billion. The latest downgrade in expectations indicates that some of the air is being sucked out of the tech bubble.
It comes as valuations for tech startups are being written down across all sectors, with Fidelity downgrading its investment in Snapchat and Blackrock reviewing the value of its stake in DropBox. Some of the nervous tension has also spread to the vibrant fintech sector, bashed this week by Loandepot pulling out of a planned IPO, OnDeck Capital's rapidly declining market value and LendingClub's share price slipping below its $15 IPO debut price.
Update Square shares debut at $11.20, up 24% at a $3.6 billion valuation. The shares continued to climb throughout the morning, touching a high of $14.78 in early trading. At market close, the stock was 45% up, hitting $13.07 overnight.